TODAY’S DEALS: Harrison Street Completes $125M Acquisition of Senior Housing Portfolio

Chicago–Harrison Street Real Estate Capital has completed the off-market acquisition of an eight-property senior housing portfolio located in and around the Houston MSA (seven assets) and Oklahoma City, (one asset), referred to as the E-Quest Portfolio.

One of Harrison Street’s exclusive senior housing operating partners, Bridgewood Property Co., will manage the portfolio, make an equity investment in the venture, and oversee the repositioning/redevelopment of the properties.

The acquisition, valued at about $125 million, takes Harrison Street’s Fund III (a $595 million equity fund) to over 50 percent invested since its launch in June of 2010. The Fund now has approximately $1 billion in gross real estate assets.

The portfolio is comprised of about 1,000 units and consists of Village on the Park – Houston, Village on the Park – Friendswood, Village on the Park – Oklahoma City, Carriage Inn – Conroe, Carriage Inn – Bryan, Carriage Inn – Lake Jackson, Carriage Inn – Huntsville and Carriage Inn – Katy. The portfolio was purchased from affiliates of E-Quest Management.  The communities average 12 years of age; their locations, physical plant and amenity packages are among the best in their respective markets.

The portfolio currently caters to independent living residents; however, upon completing licensing, zoning and physical plant studies, the venture has cultivated a plan to reposition each of the assets to expand their service mix to include independent living, assisted living and memory care. Properties that offer a continuum of care are increasingly favored by consumers who desire to “age in place,” and this repositioning effort will enhance each of the assets’ positioning and performance in their respective markets.

While many of the acquired communities are fully-occupied with waiting lists, others have experienced lower occupancies.  The broader service mix will allow the assets to attract a wider base of seniors, as well as cater to existing seniors’ needs as they require more intensive healthcare, supervision and support.  Historically, the vast majority of resident move-outs from these communities have been due to the need for assisted living services; hence, this repositioning will allow the properties to retain the higher acuity residents.

“This transaction is emblematic of one of HSRE’s core strategies:  to identify opportunities to unlock value by repositioning assets,” says Michael Gordon, senior vice president, Harrison Street. “We have sourced a portfolio of established, well-located Class-A assets that already benefit from a great reputation. We are excited to expand the scope of services that will be provided to our seniors, and generally enhance the assets, creating optimal living and working environments for staff and residents.”

Gordon says Harrison Street elected to involve Bridgewood in this transaction due to a variety of factors, including the firms’ established relationship, Bridgewood’s expertise in the redevelopment of continuum or care communities, their relationship with the Texas licensing agency and their general philosophy of providing great care to seniors. “Our collective vision for this portfolio has begun to take shape,” Gordon says.

E-Quest Management, the corporate/management company that developed and currently manages the assets, is being purchased by Bridgewood as a part of the transaction, and they will continue to provide management services to the communities. The existing staff at both the corporate-level and the property-level will stay in place, and Bridgewood will immediately hire a corporate head of Health & Wellness and healthcare professionals at each of the properties.

The assets are currently encumbered by debt that is being assumed by each asset. GE Healthcare is the lender on five of the properties, and FNMA/Greystone is the lender on the remaining three properties.  The venture has restructured the terms of the financing, and all parties are advocating the repositioning of the communities.

HFF arranges $23.5M for Florida community

Plantation, Fla.—Holliday Fenoglio Fowler LP has arranged $23.5 million in financing for Plantation Colony Apartments, a 256-unit community located in Plantation, Fla. HFF secured the loan for the borrower through Western National Life Insurance Company. Proceeds were used to recapitalize the property.

Plantation Colony Apartments is located about 12 miles west of downtown Fort Lauderdale. The property has one- and two-bedroom units and is 95 percent leased. Community amenities include two pools, two lighted tennis courts, a computer lab, fitness center, playground and dog park.

“The desirability of the property’s location and the owner’s attention to property improvements contributed greatly to the very long history of high occupancy at the property,” says Paul Stasaitis, a senior managing director at HFF who led the team representing the borrower. “This only expanded the level of lender interest, and in this case a life company execution was the most compelling choice.”

Red Capital Provides $20M for Historic Philadelphia High Rise

Philadelphia—Red Capital Group LLC has closed a $20 million first mortgage interim loan on a recently redeveloped 15-story high rise apartment located in Center City. The 98-unit property also has ground floor retail. The tower was built in 1902 as the Commonwealth Title and Trust Building. It is currently listed on the National Registry of Historic Buildings.

The project is owned by a partnership composed of three Philadelphia-based ownership teams: SSH Real Estate, Silverang Hallowell Development Company and 806 Capital LLC. The trio recently completed a redevelopment of the property that included an Art Deco lobby renovation.

The loan was structured with a competitive rate and a 12-month term with an option for two extensions. Red Mortgage Capital is expecting to provide the permanent financing.